CBK Cuts Its 2022 Growth Forecast To 5.7 Percent

By Kepha Muiruri For Citizen Digital

The Central Bank of Kenya (CBK) has cut its 2022 growth projection to 5.7 per cent from 5.9 per cent in March.

The revision disclosed on Tuesday takes into account the inclusion of new economic data including leading economic indicators through to April and the 2021 Economic Survey.

The new projection sees slower than expected growth in sectors such as agriculture which is now expected to record a 4.2 per cent growth rate from a prior projection of 6.3 per cent while output in manufacturing is seen easing to 3.4 per cent from four per cent.

Meanwhile, growth in the construction sector is expected to come to projected highs of six per cent to grow by 4.9 per cent in the year to December 2020.

Some sectors are nevertheless expected to thrive further with the CBK raising its projection for accommodation and restaurant services to 25.9 per cent from 17 per cent.

Growth in transport and storage is meanwhile seen at 8.4 per cent from eight per cent while ICT is expected to post a 7.9 per cent rate of growth from a prior 5.8 per cent.

CBK expects growth in the first quarter to March 2022 to come in at 7.1 per cent as the economy maintains the recovery momentum amidst headwinds largely accented by rising commodity prices.

“The economy is expected to remain strong despite all the concerns people may have,” noted CBK Governor Dr. Patrick Njoroge.

Inflation is nevertheless expected to be a stain to growth prospects this year as key commodities including food and fuel post record price increases.

With consumer prices reaching a two year high 7.1 per cent this month, CBK opted to lift its benchmark lending rate to 7.5 per cent to manage aggregate demand in the economy with the reserve bank admitting the rate of inflation risks breaching the 7.5 per cent upper-limit target.

“There is a clear and present danger of breaching the 7.5 per cent threshold in the next few months. It is in that context that we decided to increase our signal rate. We will take all measures to deal with inflation” added Dr. Njoroge.

“If we allowed inflation to infiltrate the economy, then in some sense that would be damaging. We don’t want to go there.”

According to the reserve bank, unchecked inflation would erode consumer confidence while dampening the confidence of investors.